Jobs recovery could be impeded by red tape and extra taxes, warns CBI

21 Dec 2015

UK businesses looking to hire face additional taxes and red tape on jobs, making employing new staff too expensive, the Confederation of British Industry (CBI) has stated.

New labour costs, such as the National Living Wage (NLW) and the apprenticeship levy, mean that many companies are considering raising prices or placing a freeze on recruitment in order to offset the extra costs that these schemes will bring.

Carolyn Fairbairn, CBI director-general, stated that firms may have to cut down their workforces in order to save.

Speaking to The Sunday Times, Mrs Fairbairn warned that unless there are changes, it is ‘inevitable that there will be significant job losses’ in some sectors.

She added: ‘There’s a danger of Government complacency, with companies facing multiple increasing costs, through the apprenticeship levy, the National Living Wage and unreformed business rates, these are acting as a cumulative drag that could hamper growth’.

According to a recent study by the CBI, 43% of businesses expect to hire new permanent employees next year. Furthermore, a total of 51% of employers will consider raising wage levels to offset any costs introduced by the new compulsory NLW or the apprenticeship levy.

Some 47% of firms believe that the new apprenticeship levy will be ‘costly and bureaucratic’. A mere 16% of UK businesses support the levy.

However, a Government spokesperson said the measure ‘will mean that businesses and the public sector invest in the skills and training they need.’

The levy will be introduced in April 2017 at a rate of 0.5% on company wage bills, raising an estimated £3 billion a year.

Meanwhile, the NLW will come into force in April 2016, and will apply only to those workers aged 25 or over. The rate will initially be set at £7.20 an hour, rising to £9 an hour by 2020.